Tax Buoyancy in OECD Countries
IMF Working Papers, June 19, 2014
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- Tax Buoyancy in OECD Countries
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Bibliographic details
- Authors: Vincent Belinga, Dora Benedek, Ruud A. de Mooij, John Norregaard
- Published: June 19, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498305075.001
Scope and methodology
- Estimates short- and long-run tax buoyancy in OECD countries between 1965 and 2012.
- Uses aggregate and tax-type level analysis (corporate taxes, personal income taxes, social contributions, excises, property taxes, VAT).
Key empirical findings
- For aggregate tax revenues, short-run tax buoyancy does not significantly differ from one in the majority of countries.
- Short-run tax buoyancy has increased since the late 1980s, so tax systems have generally become better automatic stabilizers.
- Long-run buoyancy exceeds one in about half of the OECD countries, implying that GDP growth has helped improve structural fiscal deficit ratios.
- Corporate taxes are by far the most buoyant.
- Excises and property taxes are the least buoyant.
- For personal income taxes and social contributions:
- Short- and long-run buoyancies have declined since the late 1980s.
- On average, they have become lower than one.
Implications and interpretation
- Higher short-run buoyancy since the late 1980s suggests stronger automatic stabilization properties of tax systems across many OECD countries.
- Long-run buoyancy above one in roughly half of countries indicates that growth has contributed to improving structural fiscal positions in those countries.
- The high buoyancy of corporate taxes implies corporate profit cycles strongly affect revenue responsiveness to GDP.
- Declining buoyancy of personal income taxes and social contributions since the late 1980s suggests these revenue sources have become less responsive to GDP growth on average.
Source: Tax Buoyancy in OECD Countries (IMF Working Paper), June 19, 2014.